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What's New August 2019

What's New!" is a periodic update to keep you informed of the latest on the ECA Watch website. What's New! features a wide range of materials related to the reform of Export Credit Agencies (ECAs) including NGO publications and releases, news articles, commentaries and announcements about the policies and practices of ECAs and ECA-financed projects world-wide.

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(Above Ground, Ottawa 29 August 2019) For decades, Export Development Canada (EDC) has been subject to minimal public scrutiny, with media and Parliament rarely asking questions about the social and environmental costs of the business it supports. But recently, with some of the agency’s highest-profile clients facing charges of wrongdoing, that’s started to change, prompting reporters and lawmakers to question EDC’s screening practices. EDC is one of the largest export credit agencies in the world, providing roughly $100 billion in loans, insurance and other financial services to Canadian and foreign companies every year. It facilitates business in nearly every sector, including those widely recognized as high-risk for corruption, human rights abuse and environmental harm. Last year over 40 percent of EDC’s support went to companies involved in oil and gas, mining, construction and infrastructure. EDC’s track record of questionable business deals goes back decades. Without strong oversight of EDC’s operations, the government runs the risk of facilitating harmful and illegal activities that are too often present in these industries. It also risks putting Canada in breach of its international obligations, such as its duty to avoid contributing to human rights abuse.

(Bank Track, Nijmegen, 27 August 2019) 79 civil society organisations and partners have submitted a joint statement to the Equator Principles Association (EPA) and signatory banks expressing disappointment that the current review process of the Equator Principles does not go far enough to strengthen accountability and ensure access to remedy. With the EPA currently revising the fourth iteration of the Equator Principles, the “EP4” review should be a moment of ambition for advancing accountability in project finance. Other notable submissions to the Equator Principles review process have also been made by the Investor Alliance for Human Rights and First Peoples Worldwide. Since a number of ECAs subscribe to the Equator Principles too, and ECAs also use the underlying IFC Performance Standards as a benchmark, this joint statement is relevant to ECA practices as well.

(Global Trade Review, London, 16 August 2019) Two US senators have proposed a bill to reauthorise the US Export-Import Bank (US Exim) for 10 years over the traditional four, as the bank’s expiry date of September 30 inches closer. The plan, which is gaining widespread support and attention across the US and comes after legislation negotiated by House Financial Services chairwoman Maxine Waters flopped, also increases US Exim’s exposure cap over seven years to US$175bn from US$135bn. After regaining its full lending powers in May to the delight of exporters across the US and the dismay of republicans in Congress who see EXIM as “corporate welfare” which only benefits large businesses looking to score overseas sales, the expiry date for US Exim is now creeping up as its charter must be renewed, or indeed axed, next month. “With 95% of our customers located overseas, competitive export financing is critical to maintaining a level playing field with our competitors. Boeing supports reauthorising the Export-Import Bank, which helps US manufacturers create jobs and compete in a global market,” a spokesperson for Boeing tells GTR in response to the approaching expiry date. Boeing intends to offer financial services to some of its international clients if Congress doesn’t give approval for further operations, the Wall Street Journal reported.

(AllAfrica, Maputo, 25 August 2019) The Board of Directors of the Export-Import Bank of the United States (EXIM US) has voted to notify the US Congress of its consideration of a five billion dollar loan to support the export of US goods and services for the development of the liquefied natural gas (LNG) project on the Afungi Peninsula, in Palma district, in the northern Mozambican province of Cabo Delgado. EXIM US estimates that the US$5 B loan "could support an estimated 16,400 American jobs over the five-year construction period. Through follow-on sales, thousands of additional jobs may be generated across the United States" and "through fees and interest earned, the transaction also could create more than 600 million dollars in revenue for U.S. taxpayers". The borrower would be the Mozambique LNG1 Financing Company, whose owners include the Anadarko Petroleum Company, which heads the consortium developing Area One of the Rovuma Basin, including the construction of the gas liquefaction factories on the Afungi Peninsula. Anadarko was recently purchased by another US company, the Occidental Petroleum Corporation. A 2016 Friends of the Earth report (pdf) noted that: "With their farmland and fishing grounds being taken by multinational corporations, entire communities will lose their homes, land, and livelihoods. Locals will receive very few jobs, and an influx of workers from other countries and other parts of Mozambique will likely bring an increase in diseases, including sexually transmitted infections, and place a strain on already limited health-care and education resources. Friends of the Earth further notes that “By approving $5 billion in fossil fuel financing, EXIM is accelerating the climate crisis while causing local environmental damage and propelling human rights violations in Mozambique,”

(The Citizen, Johannesburg, 22 August 2019) The North Gauteng High Court in Pretoria has set aside the findings of the Seriti commission on Wednesday, delivering a scathing judgment that it had failed in fulfilling its mandate. The High Court judgment on the findings of the commission lamented that the arms deal inquiry had never been set up to investigate the truth, but only to clear the names of those implicated. Long-time critic Terry Crawford-Browne said yesterday that South Africa should cancel all still-outstanding arms deal contracts, return all purchased goods – including the fighter aircraft – and recover the stolen money from the arms deal. This includes cancellation of still-outstanding arms deal commitments, such as the 20-year Barclays Bank loan agreements for the BAE Hawk and BAE/Saab Gripen fighter aircraft that are guaranteed by the British government’s Export Credit Guarantee Department (now known as UK Finance),” he said.

(Bloomberg, Suai, 28 August 2019) Colonized by Portugal, invaded by Indonesia, suckered by Australia, Timor-Leste doesn’t need another abusive relationship. But the clock is now ticking for Timor-Leste to find international funding for a $12 billion energy project so work can start before its existing oil cash cow — a separate nearby gas field — becomes defunct as soon as 2021. Royal Dutch Shell Plc and ConocoPhillips have given up on the project after more than two decades, selling their stakes back to the government last year. Twenty years on from a referendum that brought independence from Indonesia after a brutal quarter-century conflict killed an estimated 100,000 people, Timor-Leste’s birthing pains are evident everywhere. With almost half its 1.2 million people living in poverty, the aging war heroes still in charge are now betting big on a risky energy project that could draw one of the world’s youngest nations into a wider geopolitical tussle between the West and China. Fitch Solutions estimates the project, which has been under negotiation for more than a decade, has enough reserves to yield $50 billion in revenue at today’s prices—more than 15 times the country’s gross domestic product. But there’s one big problem: President Gusmao, 73, has insisted the project is built onshore to create much-needed jobs. For energy giants, that’s unfeasible because it requires laying pipeline across a trough to depths of 3,300 meters. That’s making the U.S. nervous China will use debt as a way in to bolster its regional footprint. Timor Gap, which is responsible for developing the on-shore part of Tasi Mane, says it’s arranging $9 billion of the $12 billion needed to fund the Greater Sunrise project, and it’s agnostic about where the money will come from. It’s denied media reports that the funds would come from Export-Import Bank of China. See also Timor-Leste Should Beware China's Belt and Road.

(Belarus News, Minsk, 21 August 2019) The Russian Export Center intends to support Belarus-Russia integration projects on advancing to the markets of third countries. Plans are in place to sign a cooperation agreement with Eximgarant of Belarus, which will help lower costs of financing thanks to reducing the number of intermediaries, and will facilitate development of trade and export operations. One of the promising cooperation areas is promoting export to Egypt. The Russian Export Center has been authorized to implement the project to establish a Russian industrial zone in Egypt. It provides for setting up an industrial facility of 525 hectares in the East Port Said Industrial Zone located in the Suez Canal Special Economic Zone. The project will enable Russian exporters and suppliers to localize production in Egypt. The Russian Export Center is ready to support Belarusian enterprises which eye the African market. The Russian Export Center is a state institute established to support non-commodity export. Last year, the center provided around $19 billion to promote Russian export, and $1.33 billion to finance joint trade operations with Belarus.

(Emirates News Agency, Abu Dhabi, 5 August 2019) The UAE's Emirates Global Aluminium (EGA) today announced the first exports of bauxite ore from Guinea Alumina Corporation (GAC), its mining project in Guinea in West Africa, marking the completion of EGA’s strategic expansion upstream in the aluminium value chain to create an integrated global aluminium giant. The GAC project, and UAE's Abu Dhabi Al Taweelah alumina refinery, where production began April, create new revenue streams and secure raw materials that the UAE’s aluminium industry needs. The GAC project cost some US$1.4 billion to develop with a $750 million loan taken from development finance institutions, export credit agencies, and international commercial banks. EGA invested some $3.3 billion to develop the Al Taweelah refinery, the first in the UAE and only the second in the Middle East. GAC’s operations include a mine, railway infrastructure, and port facilities. It is expected to produce some 12 million tonnes of bauxite ore per year at full design capacity, equivalent to the weight of two Great Pyramids of Giza. Guinea is the world’s largest exporter of bauxite.

(Seatrade Cruise News, Colchester, 16 August 2019) KfW IPEX-Bank is leading a consortium to structure the financing for Genting Hong Kong’s two newbuilds for Dream Cruises at the MV Werften shipyard. The multi-ECA financing package comprises around €2.6bn toward the total cost of €3.1bn for the first two Global-class ships. Their deliveries are now scheduled for early 2021 and early 2022, instead of late 2020. The financing will be backed by export credit guarantees from Germany, the Finnish export credit agency Finnvera and the state of Mecklenburg-Western Pomerania, home to MV Werften. It also benefits from the commercial interest reference rate for ships in accordance with the OECD consensus.

(The Mast, Livingstone, 28 August 2019) Zambia's Trade Development Bank has been invited by a Chinese investment group, China Everbright, as co-managers of a US$1 billion Green Fund which will focus on green energy projects in Africa. The TDB, an Eastern and Southern African developmental bank founded in Zambia 35 years ago, has also signed a $350 million 10-to-20-year export credit line with Japan Bank for International Corporation (JBIC). Admassu Tadesse, the bank’s president and chief executive officer, said with this the TDA, would be glad to join in the development of the Batoka Gorge Hydro-Power Dam Project in Mukuni’s chiefdom. Part of the credit line will be covered by Nippon Export and Investment Insurance (NEXI), one of Japan’s two official export credit agencies, with JBIC.

(Thomson Reuters Middle East, Dubai, 28 June 2019) UAE – Etihad Credit Insurance (ECI) has signed a memorandum of understanding with South Africa’s Export Credit Insurance Corporation (ECIC) to explore, strengthen, and enhance the bilateral trade and economic relations between the UAE and South Africa.

(Financial Tribune, Tehran, 17 August 2019) In a letter to President Hassan Rouhani, private sector representatives have called on government to give more authority to the Export Guarantee Fund of Iran with regard to issuing export guarantees, according to the EGFI chief. The export credit agency says it can provide export guarantees to non-oil exporters to substitute banks’ letters of credit at a time when the economy is saddled with mounting economic and banking restrictions imposed by the United States.

On the side lines of the Tokyo International Conference of Africa’s Development (TICAD7), ATI signed MoUs with Japan’s three largest banks and Nippon Export and Investment Insurance (NEXI), Japan’s export credit agency; ATI and NEXI announced at TICAD7 the launch of a Japan Desk to be based in ATI’s Nairobi headquarters in order to provide tailored risk-mitigation support to Japanese companies and investors; ATI has a current pipeline of over US$1 Bn worth of transactions from Japanese banks.